MercadoLibre (NASDAQ: MELI) stock, the “Latin Amazon.com,” jumped nearly 5% in early trading Thursday before turning tail and giving back almost all its gains. (As of 11:30 a.m. ET, MercadoLibre is up only about 0.5%.)
It’s no secret why MercadoLibre popped — Wall Street analyst Marcelo Santos at JPMorgan Chase upgraded the stock to “overweight” this morning. The question is: Why did MercadoLibre stock then drop again?
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
In his note today, covered on StreetInsider.com, Santos cites increased “take rates” at Shopee (owned by Sea Limited (NYSE: SE) and based out of Southeast Asia, Shopee has been encroaching on MercadoLibre’s territory in Brazil) as evidence price competition may be abating. (Amazon.com (NASDAQ: AMZN) itself remains a “smaller player” in this market.)
Accordingly, Santos predicts “MELI should be able to sustain a good pace of growth in Brazil in 4Q25, above 30%,” helping the company to hit analyst targets in 2026.
Santos set a $2,800 price target on MercadoLibre shares, implying the stock could rise more than 30% over the next 12 months. But does the analyst’s argument hold water?
Shopee is “taking” a larger share of the total transaction value from purchases made on its platform as revenue. This would imply MercadoLibre’s rival isn’t trading profit margins for market share anymore — or at least not as aggressively as it used to. And that should give MercadoLibre some breathing room to expand its operating margin, which has fallen by 260 basis points over two years.
Assuming MercadoLibre can at least maintain its current 12% margin — sufficient to generate $8.6 billion in free cash flow over the last 12 months and giving the stock a price-to-FCF ratio under 12, the stock looks like a buy — and MercadoLibre stock should not be going down.
Before you buy stock in MercadoLibre, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and MercadoLibre wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $429,385!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,165,045!*
